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As inflation keeps rising, spreading concerns and chaos across the globe, we present you Finance Monthly’s most recent collection of articles and interviews covering some of the most talked-about topics in the world of finance. Here are some of our favourite stories from FinanceMonthly’s June 2022 edition: All of this and so much more - I hope you enjoy the content in our June 2022 issue! For more financial news and commentary, please visit our website to stay upto-date on industry news as it happens, join the conversation on our Twitter (@Finance_Monthly), like our Facebook page and follow us on LinkedIn and Instagram (@FinanceMonthly). Best wishes, Katina Hristova Editor firstname.lastname@example.org Copyright 2022 Published by Universal Media Ltd The views expressed in the articles within Finance Monthly are the contributors’ own, nothing within the announcements or articles should be construed as a profit forecast. All rights reserved. Material contained within this publication is not to be reproduced in whole or part without the prior permission of Finance Monthly. Circulation details can be found at www.finance-monthly.com Universal Media Ltd PO Box 17858, Tamworth, B77 9QG United Kingdom 0044 (0) 1543 255 537 Follow us on Instagram Financemonthly Find us on Facebook Finance Monthly Stay Connected www.linkedin.com/finance-monthly Tweet us @Finance_Monthly Monthly Finance Finance Monthly. Ed i t or ’ s No t e 3 Hello and welcome to the June 2022 issue of Finance Monthly Magazine! 60. How Can Incumbent Banks Meet the Neobank Challenge? 10. Are Financial Services Ready for the Metaverse? The Forgotten “S” in ESG Are Central Banks Really to Blame? 16. 20.
4 Finance Monthly. Con t en t s CONTENTS 10. Are FINANCIAL SERVICES Ready for the METAVERSE? THE MONTHLY ROUND-UP News You Can’t Afford to Miss 8. FRONT COVER FEATURE Are Financial Services Ready for the Metaverse? 10. BUSINESS & ECONOMY Are Central Banks Really to Blame? The Forgotten ‘S’ in ESG The Link Between Money & Mental Health 16. 20. 24.
5 Finance Monthly. Con t en t s 40. Wealth Management in 2022 What is Yield Farming? 56. What Does the Future Hold for Crypto-Asset Payments? INVESTMENT What is Yield Farming? 66. BANKING & FINANCIAL SERVICES What are the Trends Shaping Estate Planning Right Now? Common Estate Planning Mistakes and How to Avoid Them What’s Next in the Explosive Growth of Open Banking Payments? Wealth Management in 2022 The Rise of Green Pension Funds Why Guernsey is an Obvious Choice for Pension Schemes 32. 36. 40. 46. 50. 28. FINANCIAL INNOVATION & FINTECH What Does the Future Hold for Crypto-Asset Payments? How Can Incumbent Banks Meet the Neobank Challenge? 56. 60. TRANSACTION REPORTS Artemis Strategic Corporation’s $1 Billion Merger with Novibet Cerved’s Acquisition of Del Barba Consulting 72. 73. 66.
Finance Monthly. Con t en t s 6
7 VOTING NOW OPEN Click here or visit www.finance-monthly.com for more information Recognising and celebrating the successes and achievements of Women in Finance. Monthly Finance Women in Finance Awards2022 FM
8 Finance Monthly. THE MONTHLY ROUND-UP News You Can’ t Af ford to Mi ss The Mon t h l y Round -Up According to a US Department of Labor report, over $163 billion in benefits was likely leaked from the unemployment system throughout the COVID-19 pandemic, with a “significant portion” of this attributable to fraud. At the beginning of the pandemic, Congress formed several new programmes to support the millions of people who lost their jobs due to the introduction of lockdowns and the onset of economic uncertainty. These programmes, which officially ended last September, worked together to increase weekly benefits, extend their duration, and make more people eligible to receive them. Over this period, the federal government issued nearly $873 billion in total unemployment payments, with the Labor Department also revealing that criminals were able to defraud the system due to programme weaknesses. Fraud a Major Player in $163 Billion Leak from Pandemic Unemployment System “The unprecedented infusion of federal funds into the UI program during the pandemic gave individuals and organized criminal groups a high-value target to exploit. That, combined with easily attainable stolen personally identifiable information and continuing UI program weaknesses identified by the OIG over the last several years, created a perfect storm that allowed criminals to defraud the system,” the agency’s report said. “Applying the 18.71% to the estimated $872.5 billion in pandemic UI payments,36 at least $163 billion in pandemic UI benefits could have been paid improperly, with a significant portion attributable to fraud. Based on the OIG’s audit and investigative work, the improper payment rate for pandemic UI programs is likely higher than 18.71%.”
9 Finance Monthly. The Mon t h l y Round -Up In April, UK inflation jumped to a more than 40-year high, partly due to rising food, energy and fuel prices, as well as the ongoing conflict in Ukraine. According to the most recent data from the Office for National Statistics (ONS), the consumer price index (CPI) measure of inflation rose to 9%, the highest it’s been since calculations began in 1997. Additionally, the ONS estimates that CPI hasn’t been higher since 1982 when it peaked at around 11%. This is up from a 30year high of 7% seen in March. Chancellor of the Exchequer Rishi Sunak commented: “Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.” “We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action,” the Chancellor continued. UK Inflation Hits 40-Year High of 9% Investors are feeling rattled as evidence of record-high inflation spreading through the US economy becomes apparent. Major American retailers are reporting consumers cutting back on expensive items amid the cost-of-living crisis. In mid-May investors wiped nearly 25% off Target shares after its profit halved. Meanwhile, Walmart was down 1.3% after already falling more than 17% in the two sessions after it announced poor results on Tuesday 17th May. Target’s earnings revealed consumers have been spending more on food and household essentials but cutting back on high-margin items. Meanwhile, Walmart’s earnings revealed consumers had moved to buy lower-margin basics. Federal Reserve Chair Jerome Powell pledged the US central bank would rise interest rates as high Investors Rattled as Inflation Hits US Consumers as necessary to combat spiralling inflation. “We think the developing impact on retail spending as inflation outpaces wages for even longer than people might have expected is a principal factor in causing the market sell-off today,” commented Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. “Retailers are starting to reveal the impact of eroding consumer purchasing power.”
Lauren Mugridge Business Development Executive at Cloudsoft FINANCIAL SERVICES Are Ready for the METAVERSE? Fron t Cove r Fea t ur e 10 Finance Monthly.
As FS organisations, insurers and banks look for new ways to interact and engage with their customers and partners to boost acquisition and improve the bottom line, many are considering how they could utilise metaverse technologies. Finance Monthly. Fron t Cove r Fea t ur e 11
ajor players such as HSBC and JPMorgan are already leading the way in adopting the technology, with the latter’s report, Opportunities in the Metaverse, estimating that the metaverse poses a market opportunity of $1trn in annual revenue. Creating world-class digital experiences As organisations look to the future, having a metaverse presence has the potential to not only create virtual environments for staff and customers, but provide new ways to analyse trends, as well as extend digital operations into areas like cryptocurrencies, and generally provide a more immersive customer experience. Although it has existed in some shape or form for more than two decades, the metaverse is finally becoming mainstream. Gartner predicts that in the next four years, one in four people will spend at least an hour a day in the metaverse, performing a range of tasks and activities from shopping and socialising to attending work events and distance learning. With leading tech companies like Meta (previously Facebook, Inc.), Google and Microsoft investing billions of dollars into the technology, there is no denying that it has the potential to revolutionise the way that companies engage and communicate with customers much like social media has over the past two decades. As our lives moved online during the pandemic, the way we consume digital services like mobile banking or online shopping changed. As consumers, we don’t just compare digital experiences between competitors – but to the last great digital experience that we had; be that on our favourite fashion brand’s app or speaking with a virtual representative from our bank. Customers are demanding new ways to engage and bridging the gap between physical and virtual worlds could, therefore, help firms attract new, digitally native customers, as well as embrace and integrate new products like ‘metaverse mortgages’ and NFTs. However, FSI providers face challenges when it comes to balancing these digital ambitions with the reality of their complex hybrid IT environments and modernising their decades-old legacy environments. Balancing agility and governance Despite a real willingness from banks to accelerate the pace of digital change, this often adds to the proliferation of homegrown and third-party technologies, platforms, systems, and environments. To keep up with the pace of change, banks created DevOps-led product teams with the mandate to ‘go fast and break things. Often, these teams are siloed from the I&O (Infrastructure & Operations) teams who are Fron t Cove r Fea t ur e 12 Finance Monthly.
responsible for ensuring that the infrastructure these new products and services are delivered on is secure, compliant, and safe, but this approach is often not agile enough to meet developer’s needs. This wall between DevOps and I&O is a barrier to the agility and resilience needed to achieve digital ambitions. IT now, more than ever, must be service-oriented rather than infrastructure-oriented. I&O teams should modernise their approach to IT service management (ITSM) and become the brokers who enable and govern services across these complex hybrid IT environments. This means bringing together Platform Ops, Cloud Ops, and SRE (Site Reliability Engineers) to form a modern I&O function which supports and collaborates with its Product cousins and provides them with well-governed selfservice environments in which they can innovate. Automation for really complex IT environments Essentially, to embrace new digital experiences, banks and FS organisations must adopt serviceoriented orchestration and think about how they can move towards environment-as-code. Environment-as-code elevates infrastructure-as-code to connect Product teams with I&O teams, prioritising both developer agility and governance and allowing them to deliver, manage and orchestrate environments, platforms, and services rapidly, reliably, resiliently and at scale. It can be achieved with automation tools that can deliver full lifecycle orchestration for any application, in any environment and at scale and which provide the centralised control plane required for good governance and compliance. World-class digital experiences are built on these resilient and secure environments, and this approach can also free up developer time to focus on delivering innovative new services and products - such as those in the metaverse. It will be interesting to see how banks, FS firms and insurers move forward with plans to adopt metaverse technology and not get left behind by their competitors. “FSI providers face challenges when it comes to balancing these digital ambitions with the reality of their complex hybrid IT environments and modernising their decades-old legacy environments.” Lauren Mugridge Business Development Executive at Cloudsoft Finance Monthly. Fron t Cove r Fea t ur e 13
Business Economy. 16. Are Central Banks Really to Blame? The Forgotten ‘S’ in ESG The Link Between Money & Mental Health 20. 24.
Bus i ne s s & Economy 16 Finance Monthly.
Finance Monthly. Bus i ne s s & Economy 17 Bill Blain delves into why central banks get such bad press. Bill Blain Strategist at Shard Capital CENTRAL BANKS Are Really to Blame? In 2008 Central Banks bailed out the financial universe following the collapse of Lehman. They provided unlimited liquidity in the form of Quantitative Easing and Negative Interest Rate Policy to dodge a global recession and enable the longest bull market on record. In 2012 the ECB saved the Euro and Europe by doing “whatever” it took. In 2020 central banks stepped in to stabilise wobbling COVID struck economies with rate cuts and yet more liquidity. Today? Central Banks are being assaulted on every front. Politicians are questioning their independence – blaming them for the effects of the sudden Ukraine War Energy and Food inflation spike. Markets are watching the bull market unravel and blaming Central Banks. Read any research on
Bus i ne s s & Economy 18 Finance Monthly. the market and it will cite “Central Bank policy mistakes” as the most likely trigger for recession, stagflation, and market collapse. Financial professionals under the age of 40 have never known normal markets. They’ve learnt their trades in markets where Central Banks are expected to step in a stabilise markets, to prop up too-big-to-fail financial institutions, and keep interest rates artificially low, thus juicing markets ever higher. I reckon over half the market workforce – fund managers, bankers, traders and regulators – will never have encountered market conditions like those we’re about to experience as it all goes horribly and predictably wrong. Thankfully, there are few old dogs like me still wagging our tails in markets. We’ve seen it all before. Proper market crashes, interest rates in double digits, mortgage rates that will make a millennial’s heart tremble, and inflation the likes of which we are now seeing again. But, even we don’t know what happens next. This time… it is different. We can’t blame Central Banks for the war in Ukraine – that’s a classic exogenous shock. It’s a crisis the politicians really should have figured out, foreseen and prepared for. One of the prime duties of the state is security, and it’s the insecurity of energy and soon, food supplies, that have triggered the inflation shock. The reality is exogenous shocks outwith central bank control have precipitated inflation in the real economy. But, let’s not kid ourselves: two factors successfully hid inflation for the last 12 years: 1. Most of the liquidity injected by central banks since 2008 flowed into financial assets (stocks and bonds), where price inflation was mistaken for investment genius. (It’s also generated massive wealth inequality between those that own stocks and those that don’t.) 2. In the wake of COVID, supply chains have unravelled. The Geopolitical Tensions now apparent between the West and China mean the end of the age of globalisation – and it was cheap Chinese exports that created the deflation that kept inflation artificially low during the twenty-teens. In retrospect, the whole bull market of the Twenty-Teens looks increasingly false – a Potemkin village boom founded on overly cheap money, government borrowing and undelivered political promises. Abundant liquidity enabled the age of the fantastical – growth stocks worth trillions but profits measured in pennies, crypto-cons, SPACs and NFTs. Booming markets supported by accommodative central banks have spawned a host of consequences – few of which will prove ultimately positive. Central Banks knew the risks from the get-go. They have been trying to figure out how to undo (or taper) the consequences of their monetary stimulus while maintaining the market stability critical for Western Economies. That has all suddenly unravelled at speed because of the inflation shock. It’s the decisions taken over the past 14 years by Central Banks have led us to this critical moment in economic history. Since 2008 central banks have been using monetary experimentation to stabilise and control the economy and markets. And, as always happens, suddenly it’s turned chaotic. Its only now becoming apparent just how much these policies created massive market distortions, overturned the traditional investment narrative and caused the most massive misallocations of capital in global financial history at both the Macro and Micro levels. Oops. Take a look at markets over the past 14 years and figure it out: • The most speculative asset bubbles in history? • Tremendous financial asset inflation on the back of ultra-low interest rates? • Whole new financial markets like cryptocurrencies and NFTs emerging on the back of the broken monetary model – which will likely prove absolutely hollow scams. • And the power of FOMO (Fear of Missing Out) dragging in millions of inexperienced retail investors tomeme stocks – where they are now likely to be skinned and gutted?
Finance Monthly. Bus i ne s s & Economy 19 Oops again… How did it go so wrong? The Global Financial Crisis of 2008 threatened a global depression. The problems were multiple – a dearth of bank lending (caused as much by draconian new capital regulations as risk aversion), economic slowdown, and incipient recession… Central banks were forced to act, and flooded the economy with liquidity in the hope it would stimulate growth. It didn’t. It created market bubbles. Investors quickly realised the easiest way to generate returns was to follow liquidity. Corporate managements figured out the best way to improve their bonuses was to inflate their companies’ stock price – not through carefully considered investment in new plants and products to improve productivity and profits, but by borrowing money in the bond markets to buy back their own stock. And that’s worked well…Not! All that money has now been lost by crashing markets, and they still have to repay the debt. Again… Oops… In Europe the 2012 sovereign debt crisis followed the banking crisis, triggering massive fears of imminent country defaults and the Greek debt crisis. The ECB did what it took and used monetary policy to advance billions to banks through Targets Long-Term Repos and other emergency measures… Very quickly banks and the market realised central bank liquidity was an arbitrage opportunity – if the Banks were buying bonds, buy more bonds to sell to them! As a result, nations like Italy saw the cost of their debt plunge, allowing some of the most heavily indebted nations to continue borrowing… Yet there is no guarantee, and never will be, that German taxpayers will ever agree to pay Italian pensions. As the German terror of hyperinflation is raised, and Europe suffers stagflation, it’s highly likely we will see new tensions across European debt arise. That’s why it’s a politician rather than a central banker running the ECB! Guess what… Oops… How did the Central Banks intend to undo the consequences of the distortion they created? Taper? Hah. We are passed that stage now. I guess we will never know how they planned to untie the knot they created... The good news is chaos spells opportunity for smart investors! Today? Central Banks are being assaulted on every front. Politicians are questioning their independence – blaming them for the effects of the sudden Ukraine War Energy and Food inflation spike. Bill Blain Strategist at Shard Capital
Finance Monthly. Bus i ne s s & Economy 21 ESG has become a key focus for the investment community in recent years, and as more institutional money comes into private debt, the more ESG will be at the forefront of investors’ minds. In a recent survey by Federated Hermes, 88% of institutional investors said that ESG factors play a central role when making long-term investment decisions and are seen as more important than traditional financial metrics. Forgotten The in ESG “ ” Adam Marks VP Business Development at Fintex Capital
22 Finance Monthly. Bus i ne s s & Economy espite the growing importance of ESG, the three strands haven’t alwaysheldequal weight. Whilst the movement generated around the climate crisis means lenders’ strategies today heavily account for environmental and sustainability considerations, for example, the social aspect of ESG has at times been overlooked. This is the “forgotten S” – and “S” in the private debt world can mean a number of different things. Firstly, on the investment side, it means backing those who are supporting people who don’t have easy access to capital. Secondly, it means private debt companies supporting the community they operate in. Following the 2008 financial crisis, banks and other traditional lenders withdrew from markets. New regulation saw a tightening of credit conditions, as banks needed to hold more provisions against certain types of loans. Furthermore, there was a reduced appetite to lend in areas that were seen as high risk and low reward. By late 2009 banks had considerably tightened their belts – LTV ratios had fallen, credit card availability was cut (by early 2009, offers to households for new credit cards had dropped to around one-fifth of their count in 2006) and in the UK consumer repayments were outstripping new borrowing. Overnight, a whole section of ‘subprime’ society had essentially lost access to finance. When traditional lenders withdrew from the market, FinТech lending emerged. They had a low-cost base and used the latest technology such as open banking to better assess creditworthiness, ensuring they were lending responsibly. Many FinTech-focussed companies saw these exciting new technologies as an opportunity to establish an alternative to traditional bank lending and ultimately democratise access to finance. One area in which private debt companies are working to increase their social impact is by providing capital to those underserved segments in society. We have worked with a number of organisations, including auxmoney in Germany and Upgrade in the USA, to fund consumer loans to those who would otherwise be unable to access capital. Lenders are also increasingly able to apply sophisticated pricing models supported by AI to help lend to this segment. Small business lending is another area in which private debt companies can make a real social impact. Small businesses are the lifeblood of the British economy, with SMEs accounting for 99.9% of the business population (5.5. million businesses); following the 2008 financial crisis, however, the big banks considerably reduced their lending risk appetite, meaning small businesses have had to look elsewhere to access vital finance. As part of the FinTech revolution, new SME lenders have stepped up, helping to plug this gap and
23 Finance Monthly. Bus i ne s s & Economy offer new sources of capital in innovative ways. One such example of these lenders is ThinCats, who have lent more than £1.2bn to British businesses in the UK. Last year we were proud to have provided a mezzanine facility to ThinCats to support lending to SMEs affected by the pandemic. Our loan helped unlock £400m of funding to cashstrapped small businesses. The private debt industry’s approach to the forgotten S also extends to how we operate as a company. Every business has an important role to play in bettering, and giving back to, the society in which they operate. During the COVID pandemic, we supported two amazing causes. The first was Paperweight, a nationwide charity that helps support people with the burden of household paperwork and bureaucracy. We also partnered with a local school, many of whose families didn’t have laptops or paid-for internet. We provided both of these facilities, ensuring that children could continue learning during lockdown when the schools were shut, and teaching moved online. We are also hugely proud of Anna, our Polish finance manager, who has been coordinating our efforts in supporting Ukrainian refugees who are arriving in Poland. Anna’s local town quickly became a base for hundreds of families, and through her incredible work she has helped over two hundred refugees. Uniting around the S in ESG serves as a powerful reminder that private debt isn’t just about competition. Ultimately, finance underpins so much innovation and progress in the world; we, therefore, need the industry to collaborate and be moving in the same direction, rather than competing – especially around social issues. Better collaboration can help us all achieve the shared goal of making the world a better place. The industry’s primary priority will always be there to generate steady returns for its investors, but this needn’t be at the detriment of our responsibility to the society. Generating consistent returns whilst lending to and supporting companies that make a genuine difference is not just compatible but is at the core of how the industry should approach lending. “Small businesses are the lifeblood of the British economy, with SMEs accounting for of the business population.” 99.9% Adam Marks VP Business Development Fintex Capital
Bus i ne s s & Economy 24 Finance Monthly. The week of 9 – 15 May marked Mental Health Awareness Week in the UK and this year, the focus is on loneliness and the devastating impact it can have on people up and down the country. In light of this, Stephen Holliday, CEO and Founder of Level, delves into the connection between money and mental health. Link between MENTAL HEALTH and Stephen Holliday CEO and Founder Level The MONEY
Finance Monthly. Bus i ne s s & Economy 25 t Level, we have long understoodthatmoney worries and mental health are inextricably linked. But while physical and mental health strategies are firmly at the top of the agenda, financial wellbeing has somewhat lagged. We are currently in the midst of a cost-of-living crisis, that has left many wondering how they will make ends meet. It is only natural that a person’s mental health might suffer, with the added strain of rising fuel, mortgage and food bills. Though it is an improving picture, Brits have long had a ‘stiff upper lip’ mentality when it comes to money, in some way contributing to the loneliness that is under the spotlight during Mental Health Awareness Week 2022. But what are the practical measures that employers can take to help their staff manage their money better and, in turn, help ease a considerable burden on their mental health? Establishing a savings culture is perhaps the clearest way that businesses can support their workforce. The Money & Pensions Service, in its UK Strategy for Financial Wellbeing, states that “a financially healthy nation is good for individuals, businesses and the economy”. To highlight this, establishing an environment where people can save more is one of the five key pillars of the strategy. But as we set out before, businesses have been slower to adopt financial well-being solutions than physical or mental health. There are certainly reasons behind this: subsidised gym memberships or cycle to work schemes are commonplace because the impact on staff is measurable – unlike financial health, which is far less tangible. Employers have been turning to content (such as advice and top tips), often shared on an intranet “Establishing a savings culture is perhaps the clearest way that businesses can support their workforce.” or other means of internal communication, to help their staff manage their money. This piecemeal approach does little to move the needle. We have seen first-hand the real impact that salary-linked savings schemes are having on workers across the UK, helping thembuild a buffer to cope with unexpected bills, but also times of economic hardship, the likes of which we are currently experiencing. As a result, employers must step up to their responsibility and offer the sorts of services that make it easy for their staff to set money aside, much like with auto-enrolment pension schemes. This is a measurable benefit to the staff, but also to the business. Solutions that support financial wellbeing are proven to boost attraction and retention. Better still, they are simple to put in place for both the employee and employer, meaning a frictionless experience for both parties. We are calling upon all employers to take these simple steps to support their workforce. Money problems can be a cause of great loneliness for many. Employers must recognise the role they play.
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Banking Financial Services 40. 36. 32. What are the Trends Shaping Estate Planning Right Now? Common Estate Planning Mistakes and How to Avoid Them What’s Next in the Explosive Growth of Open Banking Payments? Wealth Management in 2022 The Rise of Green Pension Funds Why Guernsey is an Obvious Choice for Pension Schemes 28. 46. 50.
Catherine Yuan is the Executive Director and Trust Officer of Tricor Trustco (Labuan) Ltd, a fully-fledged licensed trust company regulated by the Labuan Financial Services Authority (LFSA) based in Malaysia. She has over 15 years of corporate management experience, which includes strategic and leadership training for management development, as well as wealth succession planning. She has a deep understanding of Eastern and Western cultural differences, essential to creating a mixture of strategies catered to multinational corporations and global families’ needs. She is also a STEP (Society of Trust and Estate Practitioners) member. We sat down with Catherine to discuss wealth and estate planning, and the uses of a Labuan Private Foundation for such purposes. What are the Trends Shaping Right Now? Catherine Yuan Executive Director and Trust Officer of Tricor Trustco (Labuan) Ltd. ESTATE PLANNING Bank i ng & F i nanc i a l Se r v i ce s Finance Monthly. 28
What are the current trends reshaping the estate planning sector? Based on my experience, the wealthmanagement industry in the Asia Pacific has been continuing to grow rapidly, and I believe that as the population of high-net-worth individuals (HNWIs) increases, so will their assets. For example, HSBC estimated that Chinese households will have RMB 300tn (USD 46.3tn) of investable assets by 2025, an amount equivalent to the entire US bond market. Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them. I recommend HNWIs to seek sound advice on navigating international borders, devising the right wealth structures and continually refining them. This will ensure a solid legacy and that their wealth smoothly reaches their intended beneficiaries in an internationally compliant manner. I personally believe that the lack of comprehensive financial and structural knowledge regarding wealth solutions and succession planning hinders them from finding the right arrangements to fit their families’ needs. Asian HNWIs are typically more familiar with the use of wills and trusts since these instruments have been around for centuries. Many reports suggest an increasing number of Asia families hold various kinds of assets, and these assets are moved across various countries. For example, according to CNBC, inquiries about setting up a family office in Singapore from China have doubled over the last 12 months. It is crucial Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 29
Bank i ng & F i nanc i a l Se r v i ce s 30 Finance Monthly. for these families to devise a wealth structure that is flexible, secure, and compliant enough to safeguard their assets. I can help them achieve these goals by offering them the only Private Foundation structure available in all of Asia. Today’s ageing generation is closing in on retirement and it will only be a matter of time before the younger generation takes over. I have had talks with clients, who are business owners, and they all share a similar concern: the successor of their businesses or companies. Not every child seeks to succeed through their parents. Often times they wish to forge their own path to success, their own place in the world. They may also lack the business tack or acumen to take over a leadership role in their parents’ businesses. This is where, historically, we usually see the downfall of corporations after losing their original founding members. I would advise these clients to start thinking about their succession plans ahead of time, to decide who is deserving to inherit their shareholdings in corporations, and most importantly, their responsibilities as well. I assist my clients in exploring various estate planning structures to achieve their family business succession goals. Today, we can see that the younger, smarter generation is reshaping the wealth management industry. Digital assets are gradually finding their way into estate and inheritance planning as we see a greater investment interest in them. I have had clients that have cryptocurrencies, digital wallets, and social media accounts, all of which are relatively new forms of assets. As the adoption of digitalisation continues to rise rapidly, we need better protection and planning of digital assets. I would advise my clients to make a thorough inventory of all online accounts and passwords so that their beneficiaries have access to them after their passing. Digital assets in estate planning can be complicated. The laws that govern digital assets vary from country to country, platform to platform, and governments around the world struggle to keep up with the ever-changing technological landscape. I have come to notice that the HNWI’s families in Asia have an increasing need for family wealth planning to preserve and pass on their assets to future generations, including increasingly prevalent digital assets. I strongly believe that Asia’s wealth management community must adapt to digitalisation trends so that the products and services offered can cater to today’s wealth planning needs. Why do clients need to consider using your help with estate planning? I have over 10 years of experience in the wealth planning industry. Our team specialises in the handling of Labuan company registrations, financial license applications, and private foundation setups in Labuan. We provide a comprehensive suite of services for corporate estate planning – including corporate secretarial services, corporate governance, and management advisory – to global families, multinational companies, entrepreneurs, and investors from all parts of the world who seek to preserve their wealth through the Labuan Private Foundation. Tricor Trustco (Labuan) Ltd has actively promoted the Labuan Private Foundation since the inception of the Labuan Foundations Act 2010. We are part of the Tricor Group and are backed by a strong global network with offices in 22 countries or territories scattered all throughout Asia and other parts of the world to provide bespoke services to all our clients. Tricor Group is the largest company secretarial firm in Malaysia. We serve major publicly listed companies in Hong Kong SAR, Singapore, and Malaysia, offering services such as share registrar and company secretary. Our major clients also include 40% of all existing Fortune Global 500 companies, and we serve them as their all-inone corporate services provider. I trust that with our many experts and professionals, covering many different corporate industries and from countries all over, Tricor has the resources, expertise, and manpower to meet any challenges our clients may face.
Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 31 How can a Labuan Private Foundation help with estate planning? My experience in estate planning has taught me that there is no “one-size-fits-all” approach. An estate plan must be tailored to meet specific goals, adapt to family dynamics, and improvised to suit evolving family trees. Popular estate planning tools such as wills, trusts, and foundations all have their similarities and their differences. It is my job to help clients identify their objectives, choose the right tools, and construct the proper structures to effectively fulfil their goals. The fundamental objective of succession planning is for you to ensure that your wealth is passed on to your loved ones so that they are equipped to face hardships in your absence. The sole jurisdiction in Asia that offers private foundation wealth protection is in Labuan, Malaysia. The Labuan Private Foundation is the only one of its kind in Asia. The Labuan jurisdiction is a whitelisted jurisdiction by Organization for Economic Cooperation and Development (OECD), supported by a strong and transparent regulatory framework covering all business solutions and wealth management needs. The Labuan Private Foundation is a legal entity fully protected by the Labuan Foundations Act 2010. The Private Foundation has its own separate legal identity, which is similar to that of a company, which helps to limit the risks and exposure of a Foundation to the Founder. With its own legal identity, the Foundation can own a multi-currency bank account and even have a trading account to hold shares of public companies listed on stock exchanges and so on. It essentially acts as an ultimate holding structure. It is also governed by a set of customised Charter and Articles, which allows each and every Foundation to be unique and flexible enough to suit each Founder’s purposes. The lifetime of a Foundation can also last in perpetuity, in either the Conventional or the Islamic form, which allows for families to further plan for their long-term objectives. Personally, I have seen families struggle internally when the patriarch or matriarch of a family passes, leaving behind unclear directions or vague interpretations of their wealth distribution instructions. This causes significant distress, confusion, and discord amongst the surviving members of the family. I have helped clients overcome these issues by devising a profound Labuan Private Foundation structure that details the blueprint of howwealth should be managed upon the passing of a loved one. With the Labuan Private Foundation, I am able to give my clients the priceless gift of a peace of mind. While thesemay seemcomplicated and confusing at first, I can advise on vehicles that suit my clients’ best interests and help drive their estate planning forward. “Over the years, we have seen the emergence of a new affluent group with a more diversified lifestyle. However, the transfer of wealth is still a challenge for many of them.” Catherine Yuan Executive Director and Trust Officer of Tricor Trustco (Labuan) Ltd. E: email@example.com T: +(60)12 203 1143 W: www.tricorglobal.com
Common ESTATE PLANNING MISTAKES & How to Avoid Them Kieran Osborne has been in the financial & estate planning industry for over fifteen years. He’s well known for taking a new and radically different approach to the business of estate planning, which is often viewed as quite a stuffy and traditional industry full of solicitors. We caught up with him to hear all about his company Squiggle, his thoughts on DIY and online wills and the key mistakes people make when it comes to wills and trusts. Kieran Osborne Founder & Managing Director at Squiggle Bank i ng & F i nanc i a l Se r v i ce s 32 Finance Monthly.
What’s your story? My journey to Squiggle and estate planning started initially in the banking industry. Back then, I was an adviser to a wide range of small businesses. When I listened to the stories and challenges of these businessmen and women, a pattern started to emerge. I couldn’t help but notice that many of their challenges and struggles were often at odds with the banking industry’s relentless focus on profit margins, metrics, and data. So, when I was headhunted for a senior client-facing role in the legal industry, I didn’t hesitate to make a move, as I believed I could make more of an impact as I believed at the time that this was a more ‘caring’ industry. However, several months into my new role, it started to slowly dawn on me just how archaic and traditional this sector was as well. I saw so many things that badly needed to be shaken up. Charging the client by the hour led to a transactional culture. There was a poor understanding of how technology could really help the customer and increase customer service levels. The ‘paperless’ office seemed to be a far-fetched idea in many cases, all leading to a culture of silo-thinking, poor security protocols, little or no transparency and poor knowledge sharing. This all translated into an extremely unwieldy and expensive service for the customer with bottlenecks everywhere. All these challenges represented an opportunity for me and that was when I decided to found Squiggle – to leverage the best of technology, people, and good old-fashioned customer services to provide the customer with an entirely new experience. What are currently the hottest topics being discussed in relation to Wills, Trusts & Estate Planning? There are a number of topics that are quite ‘hot’ at the moment. A key concern of mine has always been the ability of a client to access their information at any time of the day, seven days a week. Of course, this has a lot to do with the introduction of the latest technology. But not everybody likes technology for a number of reasons. First, the introduction of any technology can be seen as a threat bymany solicitors. Less interaction time with the client means less billable hours. Secondly, solicitors have often felt threatened Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s 33
34 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s by the technology themselves. Many solicitors simply outsource their technology to an IT firm without understanding the strategic role that technology can play. Lack of this vital layer usually results in unwieldy ‘legacy’ technology that is costly and complicated. On the client-side, many of our older clients have generally been technophobes (although that is now changing gradually), and when they’re faced with having to use legacy technology that I spoke of just now, it’s not surprising that many clients prefer the more expensive solicitor interaction (to the solicitor’s glee). It’s my firm belief that technology doesn’t have to be complicated. Mobile devices and better connectivity have enhanced the customer experience massively, driven down costs, improved security protocols, andmade it somuch easier for family members to collaborate with each other. All these things are vital, especially when it comes down to something as sensitive as estate planning and inheritance matters where you want to keep confusion and miscommunication to an absolute minimum. Technology is absolutely vital. Something else I hinted at earlier was the issue of bottlenecks. Estate planning can be complex with many moving parts, so it is vital that bottlenecks are kept to a minimum and we can take care of our clients’ documentation as seamlessly as possible. But it’s not always easy. Let’s take a government department such as the Office of the Public Guardian or the Land Registry which are dealing with thousands of documents on a daily basis. It’s therefore not surprising that these departments can cause huge delays in our comprehensive estate planning process. In some ways, that goes back to the technology point I made earlier. You can’t have excellent customer service without the ability to communicate quickly and clearly. And when there’s a delay from a government department, it is absolutely vital that we communicate that promptly with our customers without them feeling that they’re being charged by their solicitor for writing a letter. Regulation is also something that has been spoken about a lot. One of my frustrations in the past was witnessing how many ‘middlemen’ and ‘fly-by-nights’ there are in this industry with no self-regulation. And this gives our industry a very bad name. I decided not only to build a team and the technology to eradicate this but also to ‘self-police’ by keeping ourselves to the highest standards possible. That’s why Squiggle are members of the Society of Trusts & Estate Practitioners, the Institute of Paralegals, and the Society of Will Writers. We’re also a member of the relatively new ‘BEST Foundation’, a governing body for Estate Planners, they have recently sent an open letter to the Office of the Public Guardian with the industries concerns around the Office of the Public Guardian – I fully support this. In this regard, Squiggle aims to be at the forefront of education in estate planning and we have published our own Code of Conduct and Quality Guarantee on our website. What are the main mistakes people make when it comes to wills and trusts? Having dealt with thousands of clients now, the one thing that comes to mind is just how much people underestimate the intricacies of estate planning. It’s all very well saying ‘we’ll implement simple technology’ and outstanding customer service, but everybody’s story is different. Every family has its own unique background and circumstances and it’s important we get to the bottom of each person’s circumstances as quickly as possible without charging an arm and a leg. So when somebody says to us: “our situation is really quite simple. Just leave everything to my spouse and then down to our children”, I’m tempted to respond with: “hold on, not so fast!” Life is full of unexpected twists and turns. A beneficiary might unexpectedly get divorced and/or remarried? Or they may go bankrupt. What happens then? We ALWAYS present different scenarios to each client, based on what they tell us as it’s important for them to know the potential consequences of each scenario. At the end of the day, that’s the difference between having a will written for you and getting proper advice from a qualified Squiggle Estate Planning consultant. What are your thoughts on DIY wills & online wills? Cheap DIY wills should not exist in my opinion. You’re talking about potentially leaving your estate to your loved ones and you want to rely on a cheap online will? Really? Why? I just don’t get it. Of course, online will services do have their rightful place. We even offer it ourselves at www.squiggle. me. But it’s important to maintain that crucial balance, ensuring that there’s somebody who can handhold you through the process costeffectively with other services such as a Lasting Power of Attorney and
35 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s additional support and advice when needed. Remember, you don’t know what you don’t know. I often compare our industry to owning a car. You know a car needs four wheels and an engine, but do you know why you need the pistons and what causes them to go up and down and so forth? Most people don’t need to, but at least they should understand the inner workings of estate planning. That is why you need a mechanic, or, in our case an Estate Planner. Why should more people consider working with you? Because we’ve turned the cart completely upside down. Squiggle is the company that’s decided to do things differently. We don’t charge by the hour, like most legal practitioners. We’re completely open and transparent. And we seek to educate. We’ve set the bar high for ourselves. We ruthlessly audit all documents to make sure they are legally binding. We’ve come across so many wills from competitors where the company hasn’t even bothered pursuing the signing of a will. In our case, it’s so important for us that have a dedicated meeting to ensure this happens. And it’s written into our process. Another point is security. So many legal practitioners tell their clients they must keep their documents securely, but then they seek to charge their clients for secure storage. That’s unfair and unethical in my view. We guarantee free lifetime secure storage - period. We also help our clients register all their documents as part of the service. What’s the point of investing in these costly documents if they’re never registered? Again, it’s all part of our service and part of the relationships we are building. We just don’t believe in flooding the market with poorly drafted wills that are never finalised. What do you do to help the local community as a business owner? Our communities are what help us keep doing what we love. And to be honest, Squiggle wouldn’t be here without the support of our communities. That is why there are two parts to our Strategic Partner Programme. Firstly, we have our charities. We know that it is so difficult for small local charities to raise the critical money they need to support their important causes. That is why we provide ‘free wills’ to our partner charities’ donors to help them give to charity in their will. “Legacy Giving” can be such a big income earner for charities and it allows them to make such a huge difference. Secondly, we partner with local businesses. Employee retention and satisfaction are so important to most businesses, so providing a ‘free wills’ service to our partner companies is a unique way for them to differentiate themselves from their employees. What have been some of your main achievements since starting Squiggle? When I founded Squiggle five years ago, it was just me. I am now incredibly honoured to say I have a team that helps me look after a base of over 4,000 clients. It feels great to have had such an impact on thousands of lives and securing tens of millions in inheritance for generations to come. Also, being invited to be a Fellow of the Institute of Paralegals was a very humbling moment. In addition, many solicitors, financial advisers and other industry professionals have decided not to open their own private client departments. Instead, have partnered with Squiggle, safe in the knowledge that we have the right technology, processes, standards and protocols in place. And I’m proud to say that we have a really great team. What has the COVID-19 pandemic taught you? The difficult days of COVID have shone a light on both our humanity and our mortality. We not only cheered loudly for the heroes who have helped keep us safe in the dark days of this global pandemic but we have all been forced to assess what is really important: our lives, our loved ones and our peace of mind. That’s why we have developed systems, processes and a team around these very values – to help people take care of this very important aspect of their lives – before it’s too late. After working with us, our clients tell us they feel like a weight has been lifted and that they can sleep peacefully at night thanks to Squiggle – and we love knowing we have helped take care of such an important part of their life.